It has been brought to the attention of the public that British millionaires and TV stars have been using offshore accounts to protect their riches. So how does an offshore account work?
There are five key steps in which the millionaires have reaped the benefits of offshore accounts. Firstly, they create a shell company otherwise known as a company which only exists in name. Secondly base the company ‘offshore’ meaning outside your country of residency where tax is low or zero, with high levels of secrecy. The countries where this occurs are the Cayman Islands, the British Virgin Islands, Bermuda, Isle of Man, Guernsey, Jersey, Seychelles, Mauritius, Hong Kong and Shanghai. The next step is to pay nominees to ‘run’ the business for you; eliminating the chance of your name appearing on any documents. Number 4: Open a bank account in another offshore location, for extra anonymity. The shell company will then make payments into the account, which will be spent on ‘company assets’.
Primarily the information was passed on the German newspaper Süddeutsche Zeitung, which was then shared with the ICIJ (International Consortium of Investigative Journalists) This tax avoidance scheme was exposed by many leading media groups including the BBC and Guardian. The media enterprises leaked 13.4 million files from two offshore service providers and 19 tax havens company registrars. The main offshore service providers were seen to be Appleby and Estera. The law firm Appleby helps large companies and individuals with a high net worth in registering in offshore jurisdictions. The specialist firm dating back to the 1890s have operated mainly in the US with a large amount of their clientele being US citizens followed by British citizens. The source of the information is still unknown.
Amongst the large names that are being exposed is the Lewis Hamilton, Prince Charles, The Queen, U2 Star Bono and many other public figures. The big question is still to be asked: What will happen to those who avoided tax?
When the leak happened prior to this large leak there was a call on all G20 countries to tackle down on the jurisdictions with tax avoidance. Gordan Brown stated “First of all they have got to outlaw these tax havens, they have got to threaten to sanction them, they have got to punish them with, potentially, arrest warrants in some cases where people are breaking the law”. However, many years on there is still no real consequence of the people who have benefitted from the tax havens. The is still yet to be a resolution.
Sources: Guardian, BBC News and Money Expert.